Storage Soup

Storage systems vendor Dot Hill acquired privately held storage virtualization software maker Cloverleaf Communications Inc. this week for $12 million in cash and stock as part of its plan to focus more on the management of its arrays.

Cloverleaf’s Intelligent Storage Network (iSN) products are designed to manage heterogeneous storage environments as well as disaster recovery under one user interface. The transaction will consist of $2.5 million in cash, plus $9.5 million in Dot Hill stock.

According to a Dot Hill press release, Cloverleaf was formed in 2001 out of Elta Systems/Israel Aerospace Industries and was VC funded to the tune of $43 million. Dot Hill CEO Dana Kammersgard said in the release that the move signals a shift for Dot Hill, up to this point primarily a provider of storage hardware systems to OEMs, to intensify its focus on the storage software market.

“This acquisition is in line with our previously stated objectives to transform Dot Hill into a storage software and solutions focused company,” Kammersgard was further quoted as saying in the release. “Cloverleaf’s products accelerate this plan by as much as two years and with the breadth of features they provide, we believe we can compete very well with both the virtualization appliance companies as well as with the newer storage companies who bundle similar features that operate solely on their own array products.”

Dot Hill sells its storage arrays through OEM deals with Fujitsu, Hewlett-Packard, NetApp, Sun, and others, so it probably senses an industry wide shift to add virtualization features to its systems. But you have to wonder how much of an opportunity Cloverleaf management and investors believed existed for their software. They sold out for barely one quarter of the amount invested, and most of what they got is tied into the value of Dot Hill stock.

Dot Hill will hold a conference call Thursday to discuss the acquisition, which is expected to close mid-month.

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